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Coal Prices Projected to Remain Healthy in 2018

26 Jul 2018

Global coal prices are expected to remain healthy throughout 2018 owing to stable demand from China and increasing consumption in India, says the World Coal Association (WCA).WCA chief executive Benjamin Sporton projected that demand from China would continue to be reasonably strong this year, despite the country’s plan to implement a huge gasification program for households and industries to reduce its dependence on coal.Furthermore, he said India would also increase its coal imports amid soaring demand from its power generation sector and lower-than-expected domestic production.“India is not in a shortage situation, but it is running very closely behind it, and that’s really what has driven coal exports into India, and a good chunk of that is coming from Indonesia,” Benjamin told The Jakarta Post recently.The price of Asian benchmark Newcastle thermal coal had climbed to US$106.78 per ton in January after falling to as low as $74.52 per ton in May last year.“It’s really the supply constraint that sent the price to above $100 per ton over the last year, […] and I would still expect it to be somewhere in that ballpark for most of this year,” Benjamin said.The Indonesian government has limited the country’s coal production in 2018 at a maximum level of 485 million tons, 25 percent of which will be allocated for the domestic market.

Within the first two months of 2017, Indonesia’s coal production reached 28.07 million tons, 15.6 million tons of which were absorbed by the domestic market.

International OutlookCoal prices grew by 4-5 percent in August 2017 continuing a 3-5 percent growth in January 2018. SInce January 2016, when the price of coal reached a 10-year low, coal prices have rebounded by about 100 percent.

This situation is attributable to several factors. First, it is the consequence of an implemented policy in China which aimed at reducing harmful emissions. China is the largest coal consumer and coal producer at the same time. The reduction in own-grown production led to the increase in coal imports. Second, not only China reduced its coal mining. Indian coal industry also had hard times. The strike of miners led to the crisis in the industry. The Market was not ready for that and, as a result, coal prices immediately began to soar. Leading international agencies made the following prediction of future coal price change:

The World Bank in its October commodity forecast report estimated that the price for coal will fall in 2018 to USD 70/mt against USD 85/2017. After that, the price will fall in 2017 to USD 55/mt. And since 2018 it will grow slowly.

The IMF’s July report revealed a different forecast. The IMF’s experts predict a decline in 2018 to UDR 78.8/mt and a slight drop in 2019 to USD 74/mt.

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